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The Solvency 2 Regulations 2015
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- UK Statutory Instruments
- 2015 No. 575
- PART 3
- CHAPTER 3
- Regulation 20
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Internal models and capital add-onsU.K.
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20.—(1) Where group solvency is determined in accordance with method 1, the PRA must pay particular attention to F1... where—
(a)a specific risk existing at group level would not be sufficiently covered by the standard formula or the internal model used because it is difficult to quantify; or
(b)a capital add-on to the solvency capital requirement of the related insurance undertaking or reinsurance undertakings is imposed by the [F2PRA or, where there is a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking, the FSC] F3....
(2) Where group solvency is determined in accordance with method 2, the PRA must, when it determines whether the aggregated group solvency capital requirement appropriately reflects the risk profile of the group, pay particular attention to any specific risks existing at group level which would not be sufficiently covered because they are difficult to quantify.
(3) Where F4... the PRA considers that the risk profile of an insurance undertaking or reinsurance undertaking belonging to a group deviates significantly from the assumptions underlying the internal model approved at group level, the PRA may—
(a)impose a capital add-on to the solvency capital requirement of the insurance undertaking or reinsurance undertaking;
(b)in exceptional circumstances where a capital add-on would not be appropriate, require the insurance undertaking or reinsurance undertaking to calculate its solvency capital requirement on the basis of the standard formula; or
(c)where the PRA has exercised its discretion under sub-paragraph (b) to require an insurance undertaking or reinsurance undertaking to calculate its solvency capital requirement on the basis of the standard formula, impose a capital add-on to the solvency capital requirement.
(4) Where the PRA—
(a)imposes a capital add-on on an insurance undertaking or reinsurance undertaking; or
(b)requires the insurance undertaking or reinsurance undertaking concerned to calculate its solvency capital requirement on the basis of the standard formula,
the PRA must explain its decision to the relevant insurance undertaking or reinsurance undertaking F5....
(5) [F6Where the FSC is the group supervisor], the PRA must adopt and apply the following decisions by the group supervisor on the basis of an internal model—
(a)the calculation of the group solvency capital requirement;
(b)the calculation of the solvency capital requirement of an insurance undertaking and reinsurance undertaking in the group;
(c)the calculation of the aggregated group solvency capital requirement.
(6) Where the PRA has imposed a capital add-on, it must review the capital add-on at least once a year.
Textual Amendments
F1Words in reg. 20(1) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(a)(i) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))
F2Words in reg. 20(1)(b) substituted (31.12.2020) by S.I. 2019/407, reg. 9(11)(a)(ii)(aa) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(l)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))
F3Words in reg. 20(1)(b) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(a)(ii)(bb) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))
F4Words in reg. 20(3) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(b) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))
F5Words in reg. 20(4) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(c) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))
F6Words in reg. 20(5) substituted (31.12.2020) by S.I. 2019/407, reg. 9(11)(d) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(l)(ii) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))
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